the essential guide to investing in precious metals essential guide to investing in precious metals...

David L. Ganz

Precious Metals

THE ESSENTIAL GUIDE TO

Investing in

How to begin, build and maintaina properly diversifi ed portfolio

www.APMEX.com

Copyright ©2011 David L. Ganz

All rights reserved. Permission is granted for brief extracts and quotations in reviews or another author’s research, provided that this book, its publisher and

the author are appropriately acknowledged.

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The Essential Guide to Investing in Precious Metals | 3

Table of Contents

Dedication ...............................................................................................................4

Foreword .................................................................................................................6

About the Author David Ganz .................................................................................8

About APMEX .......................................................................................................10

A Precious Metals Moment ...................................................................................12

Chapter 1: Keys to the Precious Metals Markets .................................................18

Chapter 2: Bullion Prices Always Change ........................................................... 36

Chapter 3: How Some Metals Became ‘Precious’ .............................................. 40

Chapter 4: Gold Shines Through History .............................................................50

Chapter 5: The Great U.S. Gold Melt .................................................................. 60

Chapter 6: U.S. Restores Private Gold Ownership ............................................. 68

Chapter 7: Silver—The Early Choice for Coins ....................................................72

Chapter 8: Platinum and Palladium Join the Club ............................................... 84

Chapter 9: Historical Buying of U.S. Gold Bullion Coins ..................................... 94

Chapter 10: Bullion Coins Hit the Modern U.S. Market ......................................102

Chapter 11: Mintage for Modern Bullion Coins ................................................... 112

Chapter 12: Ingots Are a Popular Choice for Bullion..........................................130

Chapter 13: Methods of Investing in Gold and Precious Metals ........................134

Chapter 14: Where to Buy Gold and Precious Metals .......................................140

Chapter 15: Bullion Can Be Part of Individual Retirement Accounts .................148

Chapter 16: Putting It All in Perspective .............................................................162

Glossary ..............................................................................................................166

Acknowledgments ...............................................................................................176

Bibliography ....................................................................................................... 204


Metal Values Used in this Book

WEIGHT OF A COIN IN TROY OUNCESTroy weight is easy to

calculate once you get

the basics. There are

31.1035 grams in a single

troy ounce, and 12 troy

ounces in a troy pound. If

a gold coin like the British

sovereign is involved, you

take its gross weight in

grams (7.5739773), multiply

by its fi neness (.9167 fi ne)

and then divide by 31.10352

Generally speaking, this book uses

$1,500 as a rounded number when

referring to gold and $35 to $45 an

ounce when referring to silver. The

market and the price of the precious

metals are so volatile as to make it

easier to use the generalized number

than the specifi c. Where calculations

are given, the actual numbers utilized

are provided. Troy ounces are

converted from grams on the ratio of

1:31.1035.

8 | The Essential Guide to Investing in Precious Metals

David L. Ganz (b. 1951) has traveled the world and had a multi-faceted

career. He authored A Beginner’s Guide to Better Coins in 1965, the same

year he started writing the monthly column “Under the Glass” for The Coin

Shopper. He began writing a column with the same name for The Coin

Collector, published by the Lawrence Brothers of Anamosa, IA., in 1967, the

same year he joined the American Numismatic Association. By 1969, he moved

the column to Numismatic News, changed its frequency and became the paper’s

Washington Correspondent (1969-1973).

From that vantage point, he covered the battle in Congress to restore the

right for Americans to own gold, witnessed the Hobby Protection Act creation,

reported on the legislation that evolved into America’s bicentennial coins and

other laws passed by Congress. A graduate of Georgetown University’s School

of Foreign Service with a B.S. in Foreign Service, he received his law degree

from St. John’s University Law School in 1976. The following year, he wrote

the seminal law review article “Toward a Revision of the Minting & Coinage

Laws of the United States” which appeared in volume 26 of the Cleveland

State Law Review 175-257 (1977), and was reprinted in its entirety in The

Numismatist. Many of the suggested revisions have since been individually

enacted by Congress.

He has written more than 30 books on a variety of subjects (from “A” [for

A Critical Guide to Anthologies of African Literature] to “Z” [Zoning Law],

and a number of coin books, recently including The Smithsonian Guide to Coin

Collecting (2008), Profi table Coin Collecting (2008), Rare Coin Investing

(2010), and America’s State Quarters (2008).

About the Author


In 1974, President Nixon appointed him to the U.S. Assay Commission, and

later that year, as a journalist, he testifi ed before the House consumer affairs

subcommittee on coinage matters, the fi rst of more than a dozen times since

that he has addressed Congress on gold, silver and other coinage matters. In

the fall of 1974, he was invited on the Congressional inspection trip to Fort

Knox, and is now one of the “last standing” who have visited and taken fl oor

tours of all U.S. Mints and bullion depositories. Over the past quarter century,

he has also been a contributing editor to Gold Coins of the World by Arthur

L. Friedberg and Ira Friedberg and served as a consultant to several precious-

metal based international coin programs.

After serving on various committees of the American Numismatic

Association from 1969 to 1984, and acting as the organization’s legislative

counsel, he was elected to the ANA Board (1985) and served for a decade,

culminating with his becoming 48th President (1993-1995). Treasury

Secretary Lloyd Bentsen designated him as a charter member of the Citizens

Commemorative Coin Advisory Committee, and it was in that capacity that he

became a critical advocate for the State quarters program that has brought over

130 million Americans to collecting these distinctive numismatic items. He

served as mayor of Fair Lawn N.J., for seven years, and was recently re-elected

to a fourth three-year term as Bergen County Freeholder (a county supervisor).

When he’s not doing all of this coin and political stuff, he has practiced law

in New York City for more than 30 years as senior partner in Ganz & Hollinger,

P.C. He has three adult children and resides in Fair Lawn, N.J., with his wife

Kathy and their four felines.


APMEX is one of the world’s largest Internet-based precious metals

retailers, offering competitively priced Gold, Silver, Platinum and

Palladium products 24-hours a day, 7-days-a-week on its website at

www.APMEX.com.

Individual investors, families, individual collectors, investment

advisors, family trusts, investment funds and other individual investors

from around the world come to APMEX for precious metals assets

and related depository services. In addition to convenient web access,

APMEX assists customers through dedicated telephone representatives

trained in asset allocation and investment diversifi cation. Phone support

is available at 1-800-375-9006.

APMEX stocks a broad range of precious metals products, with over

3,500 different items in both coin and bar form, including products from

sovereign governments. The company carries:

• All U.S. Mint bullion products (including gold, silver and platinum

American Eagles)

• All Royal Canadian Mint products (such as gold, silver and platinum

Maple Leafs and bars)

• A wide selection of semi-numismatic and numismatic collectible

coins

• Supplies to help protect and display bullion coins, bars and coin

collections

About APMEX


APMEX continuously updates buy and sell prices on the website to

ensure transparency and full disclosure.

In addition, an APMEX subsidiary, Citadel Global Depository

Services, provides maximum security of precious metals through an

exclusive partnership with a global leader in security-related vaulting

services. APMEX also helps long-term investors take advantage of

precious metals individual retirement accounts (IRAs), by working

with IRA administrators and precious metals depositories.

Finally, APMEX provides useful research, information and

education through daily commentaries and weekly market reports.

Registration is free on the website at www.APMEX.com.

www.APMEX.com


“a once in two or

three generation

opportunity to

not only observe

precious metals

markets, but to be

the market....”


This is a precious moment in time – a precious metal moment.

Psychological and market barriers of yesteryear have been breached. The

United States and other major economic countries have virtually unsustainable

government debt. Gold market highs of 1980 have been swept aside. The year

2011 was fi lled with milestones.

Gold fi rst pushed past $1,500 an ounce, then went to $1,900 before

beginning a gyration. Silver moved above $30, then $40, retreated to $30 an

ounce and threw smelters into a tizzy. Platinum switched with gold for top

dog, and the Dow Jones Industrial Average (DJIA) swung like a Duncan yo-yo.

INTRODUCTION

A Precious Metal Moment

Multiple vintage U.S. gold coins.


American infl ation was under control, the U.S. dollar was under attack, foreign

currencies were in their ascendancy and coins, including bullion and trade

coins, were in their heyday.

Using prices in here may suggest to you that this book will be dated in

another year. Nonsense. It is part of history, and if you are buying and

selling precious metals, you are a part of it. That is exciting – a once in two

or three generation opportunity to not only observe precious metals markets,

but to be the market, or at least a component in it.

If you are serious about precious metal investing, you will need to see

INDEXED PERFORMANCE OR PRECIOUS METALS AND THE DOW JONES INDUSTRIAL AVERAGE (1970 = 100)


the numbers, watch the market go up and down, and memorize some of the

formulas and decide what to put your money into. You could:

• Buy bullion product such as ingots and bars.

• Buy bullion coins such as the American Eagle, Canadian Maple Leaf or

South African Krugerrand.

• Acquire semi-numismatic precious metals coins such as pre-1933 U.S.

gold coins or pre-1921 U.S. silver dollars

• Acquire numismatic precious metal coins in superior condition (generally

encapsulated)

• Buy stock or certifi cates in a gold-acquiring company.

• Buy certifi cates or warehouse receipts for gold.

• Acquire gold coins in MS-60 or MS-61 condition (a little more expensive

than a pure bullion purchase, but good value).

• A combination of many variations on this approach.

My suggestion: use this book as your reference point to help you through

the analysis that you have to do every time you want to buy or sell.

It is an exciting time for anyone who has followed the precious metals

market for the last half century. Gold is behaving in a manner that does not

correspond with prior performance. Silver is not being squeezed, but has

catapulted in value.

Gold coins that in the 1930s and before had virtually the same value as

the denomination stamped on their face or reverse now have a worth that is

substantially more. A U.S. $20 gold piece (which once had $19.99 in gold)

now multiplies 0.9675 troy ounces by the daily price of gold on the London

spot market and fi nds its metal worth over $1,500 – before adding any

numismatic value.

What’s true for gold is even more so for silver: even the simple 1942-45

War nickel (with .05626 troy ounces of silver) is worth just about $2 as silver

crosses the $35 an ounce mark.

There are now precious metal legal tender coins struck by the U.S. Mint

at the direction of Congress (which encouraged gold ownership through

their legislation) that include gold, silver, platinum and, starting in 2011,

palladium. Since 1985, the U.S. Mint has sold over 250 million ounces of

silver to the public. Gold total sales are around 24 million ounces. At current

market prices, that’s over $11 billion in silver and more than $36 billion in

gold.


Why the current interest in gold, silver and precious metals? In this book,

I will provide information to help you understand and comprehend both the

current and historical elements of gold, silver and precious metals as both an

investment and a monetary instrument.

As the calendar turned to the year 2000, it appears that a new age also

dawned on investments. The “lost decade” of the stock market up to 2010 is

more than just a play on words. Almost every investor in America saw their

portfolios stagnate or drop up to 50% as the S&P 500 (one of the broadest

indicators of stock prices in the U.S.) failed to signifi cantly improve during

the decade. However, as you can see from graph below, gold held its value or

increased during the same period while the U.S. debt signifi cantly increased

INDEXED COMPARISON OF THE S&P 500, GOLD, U.S. DEBT, AND U.S. GROSS DOMESTIC PRODUCT (GDP) 2000 = 100


and the U.S. Gross Domestic Product (GDP) did not keep up with the increase

in the debt.

The negative correlation between the historical results of the S&P 500

and gold (the two indices seem to move in opposite directions during the

same time frame) is an important concept to recall as we continue to review

precious metals as a part of a diversifi ed portfolio.

In the early 1950s, Harry Markowitz wrote a thesis on portfolio theory

which proved mathematically, among other theories, that a portfolio with

an allocation among asset groups showed increased performance over other

investment methods. Markowitz won the Nobel Prize in Economics and the

book, Modern Portfolio Theory, laid a foundation for decades to come for

fi nancial advisors to follow.

Unfortunately, during the severe fi nancial crisis in the U.S. in 2008 (and

which seems to continue), portfolio allocation among cash, stocks and bonds

did not provide balance as these asset classes moved generally in the same

direction in a relative high, positive correlation. Was Markowitz wrong in

his prize winning theory? No, the mathematics are correct, rather it was the

asset classes that may have been wrong. If an investor had included gold as

an asset class along with cash, stocks and bonds during the “lost decade,” the

performance of the entire portfolio would have improved proportionately with

the allocation of gold.

Therefore, one could conclude that a balanced portfolio is one that includes

asset classes that are not all positively correlated, but rather, some of the asset

classes must have a negative correlation to other asset classes. With some

asset classes in positive asset correlation and some asset classes in negative

correlation, the Markowitz prize winning theory begins to take effect and the

entire portfolio begins to improve in performance.

What is that asset class that can be added to cash, stocks and bonds to

provide the negative correlation? If history is our guide, then gold, silver and

precious metals would be that fourth asset class.

There is little doubt that today the American people are waking up to the

imbalance in their portfolios and have begun to vote with their wallets making

this the precious metals moment in this decade by adding gold, silver and

precious metals as the fourth asset class.


“Do you believe

that gold coins

are expensive? Well,

you’re about to

find out how gold

can be part of your

investment strategy

at a variety of price

points.”


I. Buying and selling precious metalsBuying and selling precious metals – gold, silver,

platinum and palladium – can be fun and profi table.

It can be a lucrative investment, a way to plan for

your golden years of

retirement with real

gold.

There are also

other opportunities to

extend your interest

into “rare and unusual”

coins. You can buy

bullion legal tender

coinage, or bars of

silver, platinum,

palladium and gold

in a variety of sizes,

weights, designs, and

packaging.

Keys to the Precious Metals Market

CHAPTER 1


Legal tender is simply a law of compulsion.

First used in China, Marco Polo described

how the Chinese emperor required his subjects

to accept paper money on pain of death. That

incentive compelled them to comply.

Our coinage laws initially made all coin a legal

tender with limitations. For instance, cents are

legal tender to 25 cents. That is, you can’t force

someone to take more than 25 cents in change

or payment. Dimes, quarters and half dollars

were traditionally legal tender up to $10.

Originally, gold was legal tender for its fully declared value, weight, and

measure. Today, precious metal coinage has a nominal legal tender value

declared and usually stated on the coin. It could be a silver dollar with legal

tender value of $1, a commemorative coin with a legal tender value of $5 or

a bullion item like the 5-ounce silver America the Beautiful coin with a legal

tender value of 25 cents.

The “legal tender” value is simply an accounting device. It bears no

reality to the cost of production, the metal in the coin, or anything other than

what the Mint recommended, or the legislature demanded.

Legal tender does mean, for example, that you can take a platinum $50

bullion coin worth around $700 on the open market, and go to the post

offi ce and demand $50 worth of postage stamps.

Or you can do what I did a few years ago when I took an old 1877-S

Trade dollar in Very Fine condition with a legal tender value of $1 and

asked the Mint to exchange it for a new Presidential dollar. The Trade dollar

was valued on the open market at $175, while the Presidential dollar was

worth $1.

But the Mint did the exchange at Grand Central Station terminal in New York

City, even though the staff cautioned me that the older coin was worth “a lot

more.”

LEGAL TENDER: IT IS WHAT IT IS

An 1877-S Trade Dollar


2. Gold coins aren’t always expensiveDo you believe that gold coins are

expensive? Well, you’re about to fi nd out

how gold can be part of your investment

strategy at a variety of price points.

Although silver may be more in your

price range at about $40 an ounce, don’t

think gold is out of your reach. An investor

can acquire a fractional portion of an ounce of gold in coin form, ingot

form, or even a physical paper share, which is like a shareholder with

stock in a company. A 1/10 ounce gold American Eagle coin can be

purchased for under $200 when gold is trading at about $1,600 an ounce.

3. Silver the early favorite for coinsSilver’s history is as fascinating as gold’s. Silver is a metal that our

Founding Fathers insisted on using in our coinage, but America had no

native silver mines. Coin production

depended on private individuals

bringing silver to the Mint, mostly

Spanish coins that were then melted.

Silver was the metal of choice for

much of the world’s coins until 1965

when the price jumped above $1.29 an

ounce. That allowed U.S. coinage, and that of many other countries,

to be melted for its precious metal content. After that, silver became a

signifi cant investment vehicle in the form of medallions, ingots, fl atware

and bags of U.S. silver coins.

4. Platinum and palladium join the groupTwo other precious metals are platinum and

palladium, which are from the platinum family of

metals. They are rare metals and were not known

to the ancients. Today they join gold and silver as

A 1/10 ounce $5 gold coin

A silver peso

A platinum coin from Australia


the basis for the U.S. Mint precious

metals coin and bullion program.

Palladium coinage was directed

by Congress to begin in 2011, and

soon it will join platinum as another

great metal that has some commercial

potential.

There is considerably less platinum

and palladium available than there

is gold and silver, and the market

is more volatile. Although there

are many platinum and palladium bullion coins and products (ingots,

bars, rounds and so forth), the number of coins originally intended for

circulation are few and the number of collector-oriented items many.

5. U.S. Mint promotes precious metal salesSelling bullion, bars, ingots,

coins and medallions made of

these precious metals is big

business for the U.S. Mint, which

began the modern era of precious

metals sales in 1986. Since

then, the U.S. Mint, backed by a

network of dealers, has sold more

than 250 million ounces of silver,

24 million ounces of gold, and

about a half million ounces of

platinum.

Valued at today’s market, silver

sales top $7.4 billion, aggregate gold

sales are at $38.8 billion and platinum totals $984 million. All told, that

comes in $46 billion worth of metals sold by the U.S. Mint.

A Canadian palladium coin

A 5 ounce silver bullion coin from the U.S. Mint


6. Government holdings of gold Yes, Virginia, there is gold in Fort Knox. In fact, the United States is

the world leader in gold holdings with over 8,965 metric tons or about

261 million troy ounces. Value: $483 billion. And truly, a nation or

governmental entity that controls that much gold has a say at the table over

its future, but it’s not enough to infl uence the gold market as a whole.

Thirteen nations and two international organizations, The International

Monetary Fund and the European Central Bank, have about 26,307 metric

tons of gold in their holdings. That’s $1.56 trillion when valued at about

$1,600 a troy ounce.

The United States currently has about 30.9% of the world’s gold

reserves. If you add the next three nations with the largest reserves

(Germany with 3,400 tons, Italy with 2,450 tons and France with 2,400

tons), they don’t quite equal the American hoard.

The American economy, however, depends not on how much gold it

holds, but what it produces and what it can buy in the marketplace. The

dollar is not convertible by the holder to gold; it is usable to purchase

goods and services. And the United States still produces a lot more of

these than other nations.

7. Bullion, numismatic coins marryA price analysis of the gold, silver, platinum and palladium market

for bullion coins shows that immediately after minting, bullion coins

have value because of their metal content only. However, as time passes,

many of the bullion coins become collectible as the specifi c dates of years

past are desired by collectors who wish to build a set with one coin from

each year. These older year bullion coins are bid up in the marketplace

to include premiums in excess of the metal content, with aggregate value

representing a collectible or numismatic value.

Many of today’s numismatic or collectible rarities began their lives as

bullion coins. In fact, some of the great numismatic collections were built

buying gold coins for little more than their bullion value.

Legendary coin collectors John Jay Pittman, Louis Eliasberg and

Harold Bareford all took advantage of this.


8. Precious metals now!Precious metals have an imprecise defi nition, and may change over

time, but they nonetheless have a number of commonalities. Here are some

general traits:

• Rare or scarce.

• Available in limited quantity

• Chemically less reactive than other elements

• High luster

• More ductile than other metals

• Higher melting points

• Historically used as currency

• Traded in commodity markets

• May have a value that increases and decreases over time.

• Display good tensile strength and conductivity

• Price refl ects scarcity or rarity but may vary

9. An example of my precious metal retirementBack in 1998, I decided to buy $10,000 worth of “rare coins” and turn

them into a retirement plan. The coins were all “rare coins,” but none

were terribly expensive. Because it is the best known and most followed

precious metal, a secondary portfolio was also devised consisting of gold

coins that would legally be called “rare and unusual,” but also inexpensive.

None cost over an average of about $100 each.

There were 103 gold coins in that portfolio. The gold coins came from 54

countries or issuing authorities (the United States is a country; a ducat dated

1789 from Venice, Italy, is from an issuing authority). The average cost of the

103 coins was $85.73; the total weight of all 103 coins was a shade over 17

ounces (12 troy ounces of gold equals a troy pound) and the average weight

of each gold coin was about 0.16 troy ounces (which at $303 an ounce, the

average price in 1998 would have meant that there was a core melt value of

the coins of about $5,100).

Today, when evaluating the 1998 portfolio strictly on the basis of the

precious metal content, the results are startling. Gold is a product that

shows to be a bona fi de investment. Here is the growth from 1998 to 2011.


• 103 gold coins (same as 1998)

• 17.09 troy ounces – weight of gold coin portfolio

• $1,625/troy ounce – market price of gold

• $27,776.43 – value of metal in the 103 coins

• $18,774.25 – profi t on the portfolio

• 9.8% – annual rate of return compounded over 12 years

• 2.75% – Dow increase compounded 1998-2011

• 2.5% – rate by which gold outpaces the Consumer Price Index,

1998-2011

From this, it is clear that gold is in the catbird seat.

10. Owning precious metals: the choicesYou can buy or acquire precious metal in many different forms.

In Table 1, starting on page 26, are the prices and premiums for various

bullion coin products on a random date, March 18, 2011: The London Fix

on each of the principal precious metals was:

• Gold $1,420

• Silver $35.15

• Platinum $1,720

• Palladium $720

11. A word about pricingHistorical pricing in the precious metals

fi eld may be confusing, especially for gold.

That’s because there is a “free market” price

set by negotiation between business parties,

and an “offi cial” price at which world

governments value the gold held in their

reserves.

From the mid-1830s until 1933, gold was

offi cially priced at $20.67 an ounce – the

same price it held in the marketplace. Then,

in 1933, President Franklin Roosevelt

devalued the dollar by raising the offi cial price of gold to $35 an ounce. The

FIXED VALUE OF A SILVER DOLLAR

Weight .7734 troy ounce

multiplied by the price of

silver.

At $10 an ounce: $7.73

At $20 an ounce: $15.46

At $30 an ounce: $23.20

At $40 an ounce: $30.94


TABLE 1: MODERN ISSUES CURRENTLY BEING SOLD WITH PREMIUM COST COMPARISON.

Price of Metal*

PremiumTotal Cost

% Premium

90% Silver Coins - $100 Face Value $ 2,552.00 $ 58.63 $ 2,610.63 2.30%

90% Silver Coins - $1,000 Face Value $ 25,520.14 $ 514.50 $ 26,034.64 2.02%

Gold - 1 oz Chinese Panda Coin .999 $ 1,417.50 $ 77.04 $ 1,494.54 5.43%

Gold - 100 g cast bar $ 1,417.50 $ 59.29 $ 1,476.79 4.18%

Gold - 100 g Minted Bar .9999 $ 1,417.50 $ 59.29 $ 1,476.79 4.18%

Gold 10 oz Cast Bar Johnson Matthey $ 1,417.50 $ 59.29 $ 1,476.79 4.18%

Gold Bar 1 oz $ 1,417.50 $ 31.00 $ 1,448.50 2.19%

Gold Bar 1 oz Perth Mint $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Bar 10 oz Perth Mint $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Bar 5 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Buffalo 1 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Eagle 1 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Eagle 1/10 oz $ 141.75 $ 58.63 $ 200.38 41.36%

Gold Eagle ½ oz $ 708.75 $ 58.63 $ 767.38 8.27%

Gold Eagle 1/4 oz $ 354.38 $ 58.63 $ 413.01 16.54%



Price of Metal*

PremiumTotal Cost

% Premium

Gold Krugerrand 1 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Maple 1 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Maple 1/10 oz $ 141.75 $ 58.63 $ 200.38 41.36%

Gold Maple ½ oz $ 708.75 $ 58.63 $ 767.38 8.27%

Gold Maple 1/20 oz $ 70.88 $ 58.63 $ 129.51 82.72%

Gold Maple 1/4 oz $ 354.38 $ 58.63 $ 413.01 16.54%

Gold Philharmonic 1 oz $ 1,417.50 $ 58.63 $ 1,476.13 4.14%

Gold Philharmonic 20 oz $ 28,350.00 $ 58.63 $ 28,408.63 0.21%

Kitco 500 oz Cast Silver Bar $ 17,640.00 $ 410.00 $ 18,050.00 2.32%

Olympic Gold Maple 1 oz 2008 $ 1,417.50 $ 58.63 $ 1,476.13 4.14%



Olympic Silver Maple 1 oz 2008 $ 35.28 $ 4.22 $ 39.50 11.96%





Price of Metal*

PremiumTotal Cost

% Premium

Palladium Bar 1 oz $ 729.00 $ 40.00 $ 769.00 5.49%

Palladium Bar 1000 g $ 23,437.35 $ 1,189.00 $ 24,626.35 5.07%

Palladium Maple 1 oz $ 729.00 $ 55.00 $ 784.00 7.54%

Platinum Bar 1 oz $ 1,721.00 $ 83.00 $ 1,804.00 4.82%

Platinum Bar 10 oz $ 17,210.00 $ 580.00 $ 17,790.00 3.37%

Platinum Eagle 1 oz $ 1,721.00 $ 156.42 $ 1,877.42 9.09%

Platinum Eagle 1/10 oz $ 172.10 $ 22.55 $ 194.65 13.10%

Platinum Eagle ½ oz $ 860.50 $ 86.21 $ 946.71 10.02%

Platinum Eagle 1/4 oz $ 430.25 $ 47.73 $ 477.98 11.09%

Platinum Koala 1 oz $ 1,721.00 $ 156.32 $ 1,877.32 9.08%

Platinum Maple 1 oz $ 1,721.00 $ 156.32 $ 1,877.32 9.08%

Platinum Noble 1 oz $ 1,721.00 $ 156.32 $ 1,877.32 9.08%

Silver Bar 10 oz $ 352.80 $ 19.20 $ 372.00 5.44%

Silver Bar 100 oz $ 3,528.00 $ 162.00 $ 3,690.00 4.59%

Silver Bar 100 oz RCM Minted $ 3,528.00 $ 162.00 $ 3,690.00 4.59%

Silver Bar 1000 oz $ 35,280.00 $ 670.00 $ 35,950.00 1.90%



Price of Metal*

PremiumTotal Cost

% Premium

Silver Grizzly Bear 1oz $ 35.28 $ 6.22 $ 41.50 17.63%

Silver Koala 1 Kg $ 1,134.25 $ 95.49 $ 1,229.74 8.42%

Silver Koala 1 oz $ 35.28 $ 4.47 $ 39.75 12.67%

Silver Koala 10 oz $ 352.80 $ 24.20 $ 377.00 6.86%

Silver Kookaburra 1 Kg $ 1,134.25 $ 95.49 $ 1,229.74 8.42%

Silver Kookaburra 1 oz $ 35.28 $ 4.47 $ 39.75 12.67%

Silver Kookaburra 10 oz $ 352.80 $ 95.49 $ 448.29 27.07%

Silver Lunar 1 Kg $ 1,134.25 $ 95.49 $ 1,229.74 8.42%

Silver Lunar 1 oz $ 35.28 $ 4.47 $ 39.75 12.67%

Silver Lunar 10 oz $ 352.80 $ 25.28 $ 378.08 7.17%

Silver Maple 1 oz $ 35.28 $ 4.22 $ 39.50 11.96%

Silver RCM Wolf Coin 1 oz 2011 $ 35.28 $ 4.97 $ 40.25 14.09%

Special Gold Maple 5 X 9 pure 1 oz $ 1,417.00 $ 91.24 $ 1,508.24 6.44%

AVERAGE=> 9.75%


market price and offi cial price remained more or less the same until 1968,

when a two-tiered market (offi cial and unoffi cial) price began.

It reached its apogee on Jan. 16, 1970, when the offi cial price was $35 an

ounce and the free market price fell slightly to $34.90. Since then, it has been

a march of progress. Today, the offi cial price of gold is at $42.22 an ounce,

while the free market price is some 40 times higher.

This “book price” is what is found in the Treasury Department’s balance

sheet statement, which is why so many people have a practical diffi culty in

understanding how bullion coins of today compare with older numismatic

coins that once circulated.

Melt value, by contrast, is what the precious metal coin would bring if it

were put into the melting cauldron, devoid of manufacturing or distribution

costs or any numismatic value. Melt price is what the refi nery pays.

But just because the market value of gold is $1,680 doesn’t mean the

refi nery will pay $1,680 for a 1 ounce gold coin. Everybody has to make some

money, and the refi nery has costs to melt, refi ne, redistribute and fi nance the

gold in order to bring the gold back to the market.

Today, gold will be priced differently depending on the form of delivery.

The differences in price relate directly to the manufacturing, distribution

and marketing costs for the issuer. All of these costs are added to the current

market price, or spot value, of the gold as a premium.

Gold in bar form carries the lowest costs of conversion and accordingly the

lowest premium in excess of the gold spot value. Gold in coin form, as issued

by a sovereign government, carries a higher cost of conversion because of the

minting cost, and often includes a guarantee of purity and authenticity by the

issuing government.

So, with a hypothetical gold 1 ounce bullion coin, here’s how the value

might look with gold quoted at $1,638 an ounce.


LONDON FIX $1,638

Spot Market $1,619

Melt value $1,604

Melt price $1,551

Offi cial Price $42.22

RETAIL PRICE

Maple Leaf $1,651

1 oz Bar $1,641

U.S. Eagle $1,673

Krugerrand $1,651

BUY-BACK PRICE

Maple Leaf $1,611

1 oz. Bar $1,601

U.S. Eagle $1,631

Krugerrand $1,611

There are a number of other prices for buy and sell transactions involving

many different sizes, weights and denominations for gold, silver, platinum

and palladium. For up-to-date prices, check out the APMEX website,

www.APMEX.com.

12. How much precious metal to buyWhile the asset allocation in your portfolio is a matter best determined

by you to meet your investment objectives, there are certain factors you

should consider in your decision.

Just like reviewing your asset allocation in your IRA, 401(k) or other

portfolio, your objectives include many considerations, but most likely

include the following: (a) analysis of preservation of your investment

capital, (b) the “real” return on your investments as a whole (“real” return

is the nominal return or the actual return, less infl ation over the investment

period), (c) your investment period (short term – less than one year,

intermediate term – three to fi ve years, long term – more than fi ve years),

(d) liquidity (how fast you can turn your investments into cash), (e) your

tolerance for risk and uncertainty over the investment period and other

considerations.

Generally, a balanced portfolio is one that has both positive and negative

correlations among the asset classes. Of course, no asset class always

increases every year, but one of the keys to a balanced portfolio is to

initiate, maintain and change the allocation between asset classes so that for

the time and the season of the investment cycles, you move fund allocation

between asset classes, some increasing and some decreasing, based on

your view of the economic future. Some of the asset classes tend to move


together under certain economic conditions (a

positive correlation) and some asset classes

tend to move opposite other asset classes

(a negative correlation). The concept of

a balanced portfolio is to always have

some allocation in all asset classes

(since it is impossible to correctly predict

the economic future) and you balance or

re-balance among the asset classes based

on your own view of the economic future.

This strategy does not yield a real return on

every asset class (because of the negative

correlation among the classes) but the

objective is to have the real returns more

than offset the real losses so that the

capital is preserved, as well as to provide

a net real return on the entire portfolio.

Most investors consider the asset classes

to be cash, stocks, bonds and the fourth asset

class of alternatives or tangible assets. One

of the largest assets in the fourth asset class

is gold and precious metals and this class has historically held a negative

correlation to cash, stocks and bonds. While there are negative correlations

among cash, stocks and bonds, there are certain economies when these

three asset classes move together (or positively correlate) and without

the fourth asset class of gold and precious metals, under those economic

conditions your portfolio will be out of balance and you may experience

net real losses on your entire portfolio resulting in the loss of your

investment capital. Perhaps your portfolio experienced a loss of capital

during the U.S. economic crisis of 2008 as all of your allocated asset

classes were correlated and all did not provide a real return.

The allocation among the asset classes of cash, stocks, bonds and the

fourth asset class of gold and precious metals is one of the most important

strategic decisions you will make about your portfolio. My purpose in this

book is to assist you in understanding the fourth asset class of gold and

1884-S Morgan dollar


precious metals so you can allocate properly for your investments.

Here is a fi nal thought on asset allocation: mathematically, an

asset allocation of less than 5% of the total assets most likely will not

signifi cantly balance the portfolio. Consider the possible results of this

economic scene: if the correlated assets are 99% of the portfolio and the

economic conditions are such that the correlated assets do not provide a real

return, for example declining in value by 20%, even if the 1% allocation

of non-correlated assets increase by 100%, the results are as follows: (1)

correlated asset original allocation 97% of portfolio value, after real losses,

79% of original portfolio value; (2) non-correlated asset original allocation

3%, after real returns, 6% of original portfolio value; (3) aggregate of

original value after this allocation, 85% of original portfolio value. You can

easily work through a variety of scenarios for your own asset allocation

among cash, stocks and bonds (sometimes highly correlated) and the fourth

asset class gold and precious metals (sometimes highly non-correlated).

13. How to buy precious metalsWhen buying precious metal bullion coins or products, there are a

number of ways that an investor can conclude the transaction. Here are

several ways:

• Take physical possession and delivery immediately upon payment.

• Buy it and enter into a storage arrangement with the vendor or third

party with ownership in your name.

• Enter into a payment arrangement with the vendor maintaining

possession until payment is made in full.

• Make arrangements with an independent warehouse to manage the

purchase.

• Leave the purchase with the dealer so the bullion can be easily traded

or transferred.

• Buy the equivalent of a “warehouse receipt” where the precious metal

is not specifi cally identifi ed or segregated.

• Buy the equivalent of a “warehouse receipt” where the precious metal

is specifi cally identifi ed or segregated.

• Always obtain a written receipt detailing any coins or bullion

purchased.


At one time, the coins of the United States were made of precious metal

and the face value of the coins were equal to the value of the precious

metals content. What you saw was what you got. Between 1849 and 1933,

a gold double eagle with a face value of $20 contained $20 worth of gold

(0.9675 troy ounces). And from 1794 to 1965, a silver dollar weighing

a little over 3/4 ounce (.7734 troy ounces) contained a dollar’s worth of

silver.

14. Where to buy precious metalsThere are generally three ways to buy precious metals: (1) purchase

from a retail establishment in your local geography; (2) purchase from a

telemarketer; and (3) purchase online from an Internet retailer. For a more

specifi c review of the differences in each of these buying channels, please

see Chapter 14.

For perhaps the last 2,000 years, gold and silver have been available at

retail sellers in what is basically an over-the-counter retail presentation.

Today, gold and precious metals are available in the U.S. at almost every

one of the approximately 10,000 local coin dealers while in Europe and

Asia, gold and precious metals are also available at some bank branches.

Generally, the local coin dealers are individually owned and operated

stores in strip malls and other retail locations and along with the gold and

precious metals, offer rare and collectible coins and possibly rare stamps

and other collectibles. Because the local coin dealer serves an area and

population that is geographically limited, the local coin dealer has a limit

on the total annual sales volume and accordingly, maintains inventory and

availability only meet that limited demand.

Telemarketing retail began in the 1960s and later years as 1-800

inbound telephone service was developed along with lower and competitive

outbound long distance rates. In the U.S., a very few coin dealers seized

upon this opportunity and initiated telemarketing businesses in the late

1980s and 1990s, taking advantage of a national market and geography

so that annual sales had the potential to be much larger than the local

coin dealer model and as a result, larger selections and availability was

improved. Over time, the telemarketing model has changed and today there

are a few national retailers with telemarketing services.


With the advent of the Internet in the 21st century, almost all retailers

started adding an Internet component to the local bricks and mortar

businesses. A few Internet retailers have developed over the last 10 years

that have taken full advantage of the lower cost model of one central

inventory that is wide, extensive and immediately available, lower cost

of order taking and processing and provided the customer with 24/7/365

access to buying.

In the U.S. markets, a few retailers have established very large

businesses by providing the added convenience and lower cost of the

Internet distribution model. In the gold and precious metals markets in

the U.S., just like in other retail markets, there are very few large and

successful Internet retailers. Purchasing from a large, Internet retailer

like APMEX at www.APMEX.com, offers perhaps the best selection for

immediate delivery with the convenience of web-based ordering system

which does not require (but is at your option) talking to what is often a

commission-based salesman either at a local coin dealer or at a national

telemarketer.

the essential guide to investing in precious metals essential guide to investing in precious metals...

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